McNerney Bullish On Boeing Production Growth Plans

Buoyed by the fast-track resolution to the cause of the recent Boeing 787 fire at London's Heathrow Airport, and with the imminent rollout of the stretched 787-9, Boeing is dropping the strongest hints yet that it will inevitably push 787 production beyond 10 aircraft per month.

Despite the high-profile missteps of the 787 program over the first half of 2013, particularly the extended grounding following the lithium-ion battery issues in January, Boeing appears more bullish than ever about the twinjet's prospects. President and CEO Jim McNerney says there is “no question that our No. 1 priority is to get to 10 per month, and do it well. But there is pressure beyond that to raise production rates and it is led by demand for the -9s and -10s.” The 787-9, which is expected to make its first flight within the next two months, has a firm-order backlog of 376, while the newly launched “double-stretch” 787-10 has so far attracted 50 orders, compared to 504 for the initial 787-8 model.

The 787-9 is set to enter service in mid-2014, and the 787-10 in mid-2018. These higher-capacity models make up 46% of the total 787 orderbook, which vindicates the product development strategy, McNerney says. However, with breakeven still well off, at around 1,100, and unit price per aircraft declining up to 60% over the course of the first 100 airframes, Boeing is anxious to stabilize at the benchmark double-digit production rate at year-end before venturing further. “We'll make the call on going beyond 10 once we get to 10 and get a firm foundation,” he says.

McNerney hints that the company will aim once more at the higher production-rate targets it envisaged early in the program, though. “If I were a betting man, I'd think the marketplace demand could move us in that direction over time,” he says. Although no specific target has been discussed for more than six years, Boeing previously studied rates of up to 12 and 13 per month. Under its original schedule before hitting development delays in 2007, the company planned to grow the 787 rate to 12 per month in 2011 from 10.

Sitting on top of a record order backlog of 4,757 aircraft valued at $339 billion, Boeing's focus on accelerating production also includes the fast-moving 737 assembly line at Renton, Wash., which will be ramping up to 42 from 38 per month by the second quarter of 2014, but could go even higher, says McNerney. “We can do that. We see a clear path to execution, and we are assessing the scenarios right now of how and where we would do that,” he says. Boeing's plans take into account potential growth in the orderbook for the 737 MAX, being developed to succeed the 737 Next Generation (NG) from 2017. “Interest in MAX remains significant,” McNerney says. “We have 1,495 orders today and have effectively bridged production from the NG to the MAX.”

McNerney rebuts criticism that the MAX is a slow seller compared to the competing AirbusA320NEO, which has 2,348 firm orders and 846 options. “They introduced the NEO one and a half years before we [introduced the MAX], and in terms of relative orders, we are at a similar point in time, at or slightly ahead of where they were,” McNerney says. “We are both producing at roughly the same rate and we're ready to go higher if the market demand is there. I fully anticipate about a 50:50 market share when it all sorts out. We're moving initial deliveries to the left, so we're going to be in pretty good shape,” he adds, referring to the decision to bring forward initial deliveries of the 737-8 to earlier in 2017.

The 737's already high rate, added to the all-time-high 777 production rate of seven per month, contributed to 169 deliveries in the second quarter—the highest tally for 15 years. The sum also included 16 787s, and forms a good portion of the approximately 60 it expects to deliver by year-end. Overall deliveries of all models are expected to reach 635-645 for 2013, of which the majority will be 737s.